2017 Q2 Portland Metro Multifamily Report

Against the context of 2015’s and 2016’s record sales volumes and frenetic pace of activity, Portland’s multifamily market was more subdued in Q2 2017.

41 investment transactions closed in the second quarter. Although this is an uptick in the number of transactions compared to Q1 2017, it represents a 48% decline in transaction count versus Q2 2016.

Q2 2017’s $163.2M in sales volume is 47% below the prior quarter’s total and 64% less than a year ago.

Across Q2’s 41 transactions, the average deal size was $4M and the median deal size was $2.175M. (Colliers reported the sale of Modera Goose Hollow last quarter.)

The majority of Q2 buyers were private investors rather than institutional (85% versus 15%, respectively). This indicates there are still solid investment opportunities in the greater Portland market. For example, Clark County posted the highest occupancy and effective rental rate growth among the four major metropolitan counties in Q2.

Market-wide occupancy increased compared to the first quarter (94.2% versus 93.6%), but remains slightly below the 94.7% occupancy recorded one year ago. Rental rates continued to increase moderately at a 4.1% growth rate.

While investment activity has grown more selective, market-rate development continues unabated in the short term as previously entitled projects proceed through construction. At least 583 units delivered throughout the market in the second quarter. New starts increased total units physically under construction over Q1’s level, to at least 8,305.

New entitlement applications remain highly constrained as developers find that in many cases the City of Portland’s Inclusionary Housing (IH) policy eliminates feasibility of projects with 20 or more units. A handful of new projects have been proposed, though, after the February 1, 2017 IH implementation. Some are exclusively affordable housing projects, and others contain 19 or fewer units.

Quick Fact: $163 Million

41 transactions closed in Q2, averaging nearly $4M per deal.

1,031 units transacted, with an average of $155k/door and median of $132k/door.